Buying a house with tenants and an existing lease

[Craig Wala]

Folks,

I am planning on buying a house in Texas with tenants and an existing lease that will end in late 2014. Seller has a property management co XYZ they use to manage this property.

What I want to find out are what should I be asking for before or at closing.

Here are the things I have asked for before option period expires (I have a 10 day option period where I can walk away from the contract for any reason)

a) Application criteria that was used to rent this property b) Signed Inventory and Condition Form c) Rent payment history (copies of checks or statements that renter paid on time) Additionally I will require before closing a) Seller to terminate any property management agreement with XYZ and provide this written signed termination agreed to by seller andXYZ at closing or before. b) Seller to execute an amendment to the lease or a new lease showing that starting on closing day lease will be between new owners and tenant plus where the payment should be made to. This amendment to existing lease or new lease will need to be executed between seller and tenant as a condition to close. c) Rent for month to be prorated d) Security deposit of $xxxx (as shown in lease) to be transferred/credited to Buyer at closing. Is the above appropriate and am I missing anything? Any help provided would be greatly appreciated. Thanks

[Jean Bolger]

The only thing I'd take issue with is the leases. Usually the current lease will have a transfer of ownership clause. At any rate, the new owner is bound by the terms of the old lease(pretty sure this is law in all states) So you can't really go in and insist they change an existing legal contract mid-term.

Proration of rents and transfer of deposits is standard and should be credited at closing, but it's good to specify it!

I think you're smart to specify the termination of the PM agreement because some agencies have termination fees- you don't want to get caught with that!

good luck!